Hefty impact of rising housing costs

For many groups, rising housing costs have negated any increase in income they've received. One result is a ballooning Housing Benefit bill, finds Brian Wilson.

Two recent publications examine housing costs, taking differing perspectives but reaching some similar conclusions. Neither report is rural-specific, though they are rural-relevant.

The first comes from the think tank, Resolution Foundation, and goes by the title of 'The Housing Headwind'. In essence, it tracks the relationship between household incomes and housing costs over the last twenty years. Its particular focus is working age households, for whom housing is often the biggest item of expenditure with a major impact on their standard of living.

In order to get a rural dimension on this consider figures published by Defra, which show the 'affordability ratio' in the most rural local authority areas, where lower end house (purchase) prices are more than eight times lower end annual incomes.

The Resolution Foundation notes that housing costs are determined by a range of factors and the link with household incomes is far from straightforward. As a result housing costs may consume a growing or a reducing share of household income.

Of particular importance is the period 2003 to 2009, when housing costs rose at a much faster rate than incomes. Although the post-financial crash years (2009 to 2012) saw a correction, it was only a partial correction, leaving housing costs more expensive than they had been.

One well-documented effect of this has been working age households who are unable to join the home ownership ladder and who are stuck in private rented accommodation.

Headline statistics within this report are those showing that rising housing costs have wiped out most of the growth in household incomes.

Taking the period since 2002, the income of the average working age household has grown by £32 per week in real terms. Over that same period housing costs have grown by £21 per week. In short, housing costs have consumed around two-thirds of all income growth.

Moreover, this average masks a pattern of winners and losers. There are groups whose living standard can be said to have fallen since 2002, with housing costs rising by more than their incomes. These include:

* Private renters, whose household incomes rose by £8 per week and housing costs rose by £19 per week;* Younger households, headed by someone aged 25-44, whose incomes rose by £12 per week and housing costs rose by £25 per week;* All of those on below average incomes, whose incomes rose by £18 per week and housing costs rose by £23 per week.

The NHF report highlights the fast growing number of private renter households, up from 3.0 million in 2008/09 to 4.3 million in 2014/15 across England.

One outcome of this is a larger cohort of private renter households who are claiming Housing Benefit. Today, roughly a third of all recipients are to be found in the private rental sector.

A point made by the NHF is that this comes at a cost for the public purse, since private rents are higher than social rents. Whilst social renters receive an average £89 per week in Housing Benefit, private renters receive an average of £110 per week.

Indeed, this has been the main driver behind the growing Housing Benefits bill, the annual cost for which (UK wide) has now reached £25 billion.

Given all the above it may come as no surprise to learn that a rising share of private renter households on Housing Benefit are people who are in work. Back in 2008/09 just a quarter of them were working households. Now it is nearly half.

It would be fascinating to know how all of this plays out in rural England. What we do already know is that the social rented sector is much smaller in rural areas and that housing costs are relatively high. Rural households will certainly not be immune from these trends and lots will find themselves with disposable incomes that are flat-lining or worse.

Many with a rural interest will share the view of the Resolution Foundation who, looking at the housing market, conclude that "something must be going very wrong indeed". Fixing it will not be easy. For the NHF one solution is more investment in social housing, which it believes can bring savings on the Housing Benefit bill.

This article was written by Brian Wilson whose consultancy, Brian Wilson Associates, offers policy research and support. He can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it. Areas of specialism include rural policy and proofing, public service delivery, neighbourhood plan support and local economic planning. He is a Director of Rural England CIC.